1. G. Elias & Co. (Solicitors and Advocates) PRESENTATION BY GBOLAHAN ELIAS D.PHIL. SAN ON (MARCH 18, 2011) International Conference Centre, Abuja ON “Expanding the Mortgage Sector -- Critical Issues Towards Achieving an Effective Foreclosure Process” Hosted By:ASO SAVINGS AND LOANS PLC

2. Significance of Foreclosure --We use “foreclosure” here in the broad, layman’s sense to include both foreclosure properly so-called and sale -- mortgages’ two terminal remedies -- In the traditional common law, foreclosure occurs only where the mortgagee becomes the owner of the property. Sale occurs where there is enforcement by sale to a third party who pays cash to become the owner --Mortgagees need to be able to foreclose in the event of default. Otherwise they will lose money frequently, become discouraged from further lending and go out of business --Without foreclosure, the mortgages market will dry up --Mortgages need to be more readily available if the nation’s need for homes is to be met -- Most of those who need homes cannot afford to make single payments for the homes. They can afford to pay only instalmentally 2 --

3. Practical Problems: Why Mortgages? -- Most people do not own enough cash to be able to pay at one go for the homes that they need --Mortgages make it possible for those who can pay only instalmentally to buy without delay the homes that they need --Potential lenders will lend on mortgages only if they can readily enforce the mortgages where the borrowers default on repayment --Enforcing mortgages can be slow and expensive because borrowers routinely file pre-emptively to get injunctions against enforcement 3

4.  Foreclosure: Harsh Realities -- Lenders are more reluctant to lend on mortgages than they should be because perfecting and enforcing mortgages is slow and costly -- The courts are notoriously slow in enforcing mortgages in the teeth of pre-emptive litigation by borrowers --Further, mortgages cannot be perfected or homes sold except with the consent of the Governors and upon payment of Governors’ consent fees --Every citizen has a constitutional right of access to courts and to a fair hearing -- and therefore to sue pre-emptively seeking an injunction against enforcement 4

5. The Constitutional Dimension: Executive v Legislature --The Executive and Legislature cannot compel the courts to move more quickly in mortgage cases without violating the “separation of powers” principle: the courts are masters of their own procedures and proceedings --The judges are not likely to volunteer to move more quickly in mortgage cases than in other cases because cases on other subjects ( e.g. imprisonment; elections; employment) are often just as urgent and important as mortgage cases 5

6.  The Constitutional Dimension: Federation vs States -- The Federal Executive and Legislature cannot compel the States to move more quickly on creating and perfecting land mortgages because land is a matter for the States, not the Federation --The States are not likely to make the process of creating mortgages and selling mortgages really quicker because the current process perhaps gives their officials more power and money than an efficient process would 6

7.  Constitutional Change? --The key change needed has to come from within the courts and cannot be confined to home mortgages --The courts need to become less tolerant of delay tactics in all or, at least, most categories of litigation, and they need to volunteer to do so --The courts cannot be compelled to move more quickly by legislation or executive fiat unless the Constitution is changed. Such a change is not likely to occur soon 7

8.  Options: Company Law Solution? --The sad conclusion is that the solution to the problem is not likely to come from the Executive or Legislature. It has to come from the private sector. --It is far from clear that there is an unassailable solution to the problem, but a possible partial solution is to re-cast the problem as a company law problem rather than a land law problem. 8

9.  Options: What Co-operatives are? -- Property development for mass housing may be done by having the land held by a company with numerous classes of shares such that each share carries rights to enjoy a particular home unit -- This idea is widely used in other nations. New York State is the leading practitioner and calls an organisation using the idea a “co-operative ” -- The housing “co-operative” idea has been developed primarily not for mortgage enforcement purposes but to make positive covenants “run with land” and bind all members of the cooperative even where there is no privity of contract, a matter that the common law has traditionally not encouraged 9

10.  Options: Legality of Co-operatives? -- The idea has not been widely used in Nigeria, but nothing in our law forbids it --There are in practice already companies with classes of shares each class carrying rights to enjoy the fruits of some particular plot --With the “co-operative” idea, the creation of home mortgages and enforcement sales of mortgaged homes become transactions involving shares (a company law matter) rather than one involving land --On that theory, the Land Use Act would not apply, Governor’s consent fees would not be chargeable and title would not need to be registered at States lands registries. 10

11.  Options: Possible Problems with Co-operatives --There is a risk that courts will see this as a violation of the Federalism principle in the Constitution. But how about the “Federalism” violations that are already routine? -- There is also a risk that the courts will say that a member of a cooperative cannot sue for possession or in trespass. But trespass depends on an immediate right to possession, not on title, and the company’s Memorandum and Articles will support an immediate right to possession --We will need the courts as long as we will need the law, and there will always be delay. That can’t be helped completely 11

12.  Conclusion --The Courts themselves need voluntarily to change the rules on the abuse of interlocutory injunctions and other delay tactics. Unless we change the constitution (which is not likely to happen) the problems from within the judicial system to remain with us. --The “co-operative” option is a way to address the problems arising outside the judicial system -- the Land Use Act and State Government problems. I commend it to this audience 12